FOB (shipping) - Accounting and Auditing

Accounting and Auditing

In the past, you would be able to determine when title transferred for goods based on the FOB point. For example, at year- and period-end goods in transit under "FOB destination" (North American usage) appear on the seller's balance sheet but not in the buyers balance sheet, as the risk and rewards of ownership change to the buyer at the "destination" port.

It is much easier to determine when title transfers by referring to the agreed upon terms and conditions of the transaction, typically, title passes with risk of loss. The transfer of title may occur at a different time (or event) than the FOB shipping term. The transfer of title is the element of revenue that determines who owns the goods and the applicable value.

Import fees when they reach the border of one country to enter the other country under the conditions of FOB Destination are due at the customs port of the destination country.

With the advent of e-commerce, most commercial electronic transactions occur under the terms of "FOB shipping point" or "FCA shipping point".